The Russia-Ukraine sanctions war takes to the skies

With Russia and Ukraine now having imposed mutual sanctions on each other’s airlines, the implications could affect the struggling economies of both countries and lead to similar types of tit-for-tat measures.

A plane belonging to Russia's S7 airlines prepares to depart from Borispil airport to Moscow airport Domodedovo in Kiev on Oct. 24, 2015. Direct flights between Ukraine and Russia will be stopped at midnight on Saturday October 24, with tens of thousands of passengers affected each month, after the Ukrainian Security Council adopted a resolution to impose sanctions against Russian air companies for their flights to annexed Crimea. Photo: AP

The Ukrainian government recently announced a ban on certain Russian airlines flying into the country. The government’s decision was based on several key reasons, in particular the current state of Ukraine-Russia relations and changes occurring inside the aviation sector at the national level.

What is the key reason for closing the airspace between the two neighboring countries? The Ukrainian ban’s measures were introduced within the framework of the extended personal economic restrictions imposed against Russian officials for backing separatists in eastern Ukraine and against business enterprises in specific sectors considered "materially or financially supporting actions undermining or threatening Ukraine's sovereignty, territorial integrity and independence." The personal sanctions list currently includes nearly four hundred individuals and about one hundred legal entities.

What is important, Ukraine banned only direct flights by Russian airlines to punish them for flying to Crimea, a peninsula annexed by Moscow in March 2014, as well as Russian planes carrying military hardware or troops from flying over Ukrainian territory.

The Oct. 25 decision came from the National Security and Defense Council of Ukraine after Ukraine’s President Petro Poroshenko signed the Oct. 16 decree, which sanctioned many of Russia’s leading airlines, including Aeroflot, Red Wings, Transaero, S7 (Sibir) and others. Yet Ukraine left the right to fly for several Russian airlines - in particular, Utair, which did not fly to and from Crimea.

Shortly after, Russia’s aviation agency announced its intentions to close its airspace to all Ukrainian airlines, which launched another round of the sanction wars, this time, in the sky.

Russia’s position: “Mirror sanctions”

Taking into account the experience of Russia’s responses against sanctions imposed by the West, the most predictable decision Moscow could make in this situation was to introduce “mirror sanctions” against the Ukrainian airlines. The Russian authorities blacklisted a number of Ukraine-based airlines, including Ukrainian International, Dniproavia, Motorsich and others.

Meanwhile, the Kremlin called the Ukrainian sanctions on Russian flights "another act of madness."

The cost of the Russia-Ukraine “air wars” is currently estimated by financial analysts in the tens of millions dollars. Furthermore, most experts in the field of aviation come to the conclusion that the ban will hurt Russia more than Ukraine as the country’s losses are expected to be three or even four times more. According to preliminary estimates, Ukraine could lose $15 million.

Ukraine’s position: Punishing a lawbreaker

The Ukrainian authorities made it clear that the ban affects all Russian airlines and intends to counter the measures imposed by Russia’s aviation authorities on Ukrainian airlines. According to Ukraine’s Infrastructure Minister Andrey Pivovarsky, Kiev has documentary evidence of multiple international norms violations on the side of Russian airlines flying to Crimea, which, Kiev and the West argue, is occupied by Russia.

In addition, Ukrainian sanctions on flights are seen by Kiev as a response to Moscow’s policy in Donbas and its negligence in following Ukraine’s national legislation.

In fact, the general extended list of sanctions adopted by the Ukrainian authorities followed the prolongation of sanctions on the Kremlin by the EU and U.S. in early September.

However, sectoral sanctions on the Russian airlines are unexpected measures from the Ukrainian side. To be precise, lawyers clarify that Ukraine had to impose such bans on Russian flights a year and a half ago to prevent them from flying over Crimea. Kiev estimates the Russian penalties for carrying out flights over the peninsula should be approximately $646 million.

In reality, Ukrainian sanctions against Russian airlines can be regarded as a steadfast state’s position aiming to defend its national interests. “Ukraine is punishing a lawbreaker, and not building an ‘iron curtain,’” said Pivovarsky.

Collateral damage from the mutual ban

Nevertheless, the ban on flights against Russia will influence not only the relations between the countries, but also the development of the national aviation sector as well. After all, Ukraine is currently moving towards signing the EU-Ukraine open skies agreement and is expecting the arrival of new European airlines to its market, especially low-cost companies.

In this respect, the reestablishment of air traffic between Russia and Ukraine could even hasten the reformation process in this field. Moreover, the leading Ukraine airlines are also looking for new ways of doing business and proposing ambitious solutions. The competitiveness in the Ukrainian aviation market might significantly increase in the nearest future.

At the same time, the top Ukrainian airlines reacted immediately to the flight bans and claimed that they would lose $46 million each year after the introduction of restrictions. After all, the air passenger traffic between the two countries stood at 657,000 in the first half of 2015. The flagship airlines of Ukraine and Russia, Ukrainian International Airlines and Aeroflot, carried out most of these flights.

Is there any chance in the short-term for cancelling the mutual ban?

What is the scope of mutual sanctions on flights? The bans have the potential to hit both countries’ already struggling economies and lead to further economic disentanglement between Ukraine and Russia.

Taking into consideration the current financial losses in the aviation field due to the continual war in the eastern Ukraine and the annexation of Crimea, the last thing that Ukrainian and Russian airline companies need is flight bans. They are already suffering from economic contraction in their respective countries and weak consumer spending.

However, Ukraine demands the payment of penalties from Russia; otherwise the sanctions on flights will not be cancelled.

Nevertheless, Russia’s position should be considered in the context of its interest in maintaining flights between the country and Crimea. Moscow’s geopolitical interest in Crimea prevails over its national economic interests. So, the Kremlin is hardly likely to yield and pay any penalties to Ukraine for returning to the status quo in the Russia-Ukraine “air war” in the short-term.

The opinion of the author may not necessarily reflect the position of Russia Direct or its staff.

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Yulia Karabkina is an expert from the Kiev-based Center for Operational Strategic Analysis (COSA), an independent analytical center that offers the expertise of both local and international analysts. Graduated from the National University of “Kyiv-Mohyla Academy” and got a major in Political Science (European Studies). Julia worked as an intern at the Kyiv-based think tank “Institute of World Policy”.